Hasbro

Notes from the Feb 25 Hasbro Investor Event

Some fascinating news game out of the February 25, 2021 investor event put on by Hasbro[1]. Here are some of the most interesting points to come out of the event in my eyes

Hasbro earned more than $1,000,000,000 in e-commerce sales.

This is a remarkable achievement of marketing to grow this avenue of business as successfully as they have. In 2020 e-commerce sales accounted for 30% of all Hasbro revenue[2] and they’re expecting this growth to continue. To help with this growth Hasbro has created Hasbro Pulse and used it, along with other avenues they’re developing, to increase their D2C (distribution to consumer) presence. There isn’t a lot on Hasbro Pule yet for me, but the site has a lot of exclusives that appeal to hard core fans of their other brands.

Wizards is highlighted as “highly profitable and growing through player expansion, new games, and new IP” and is on track to double the size of Wizards by 2023. (pg.5)

This level of growth is incredible. To double your growth in five years is just astonishing. For much of the last year I’ve seen speculation online about how Wizards of the Coast was unprofitable for Hasbro, and how D&D in particular was an albatross around the company’s neck. However, in the report they keep bring up D&D and Wizards, as a whole, as highly profitable. If this is the case, then such talk was just fevered imaginations at work without any connection to reality.

“A very distinct and valuable part of Hasbro is our Wizards of the Coast and Digital gaming businesses. We have been investing in Wizards extensively, in both innovation and storytelling and digital game development . . . The Wizards and Digital Gaming segment has high gross and operating profit margins. In 2020, at 46.4%, this operating margin was higher than average due to the strong growth in MAGIC: THE GATHERING and DUNGEONS & DRAGONS, and lower expenses in the business. On an ongoing basis, we are reinvesting some of this profit in new digital game development and releases, which often occur years out from the investment.” (pg 6)

This is an amazing level of profitability for any business especially for Dungeons & Dragons. I am shocked at this number and wouldn’t have imagined it to be so high. This speaks to a lot of things being done right in Wizards’ house. Their supply chains, employee pay rates, licensing agreements, and so much more have to all be done perfectly for the company to be doing so well.

New Wizards-branded games to be launched in 2021. These are a part of nearly $70 million dollars used in game development costs. (pg. 6)

I wonder if Baldur’s Gate III is considered a part of this package since it’s still an early release game?

“In 2020, Wizards had its largest year ever and generated $816 million in revenue, finishing up 24% year-over-year. This was led by record-breaking years from Magic, up 23%; and D&D, up 33%.” (pg. 11) “ . . . Over the last 10 years, Wizards has average growth of 13%, with the last 3 years, seeing an acceleration to over 21% on average, as we transformed our content cadence, launched new digital initiatives like MAGIC: THE GATHERING Arena and made smart choices in digital licensing, an area we continue to see high growth and high profit potential beyond our core, including more broadly with our Hasbro brands . . . And we are accomplishing all of this with industry-leading profit margins, with Wizards operating profit up over 400% in the period shown.” (pg. 12)

Absolutely astonishing growth for D&D as this is now the seventh year for 5e[3]. To continue to grow year over year at double digit growth rates is astonishingly good. It also points to the notion that there will not be a new edition of the game for some time to come. When something continues to perform at such a high rate why would you bring out a new one? If sales were slipping, sure, but to continue to be performing with record-breaking years seven years after launch?

You’d be crazy to push that cart over.

Dungeons & Dragons is the centerpiece of the digital efforts with: Dark Alliance and Baldur’s Gate 3. (p12)

I had completely forgotten about Dark Alliance before this statement. The reveal trailer they launched for it in December looked terrible. I’m hoping that they’ll come up with a better game before launch otherwise it will be a hard pass for me. I’m buying Baldur’s Gate 3 when it goes on sale because I never buy anything at full price.

“For DUNGEONS & DRAGONS, we’re coming off our best year ever and aiming to capitalize on that momentum in 2021 with new formats and storytelling opportunities in our main campaigns while increasing the cadence of those releases.” (pg. 13)

New formats, new stories, and more of both. I wonder what they mean by new formats? The games already come out in digital and physical formats. Are they releasing audio books? I honestly have no idea what the new format could be but I’m excited to find out.

“And then future games, the fact that Chris has more than a dozen games in development, including new IP that really reflect this idea of a lifelong love of gaming and that ability to have a lifestyle game that you can literally enjoy for a lifetime. We think the fantasy gaming area is unique and differentiated. The way that Chris and the team approach that allow us to get higher revenues and, frankly, much higher margins.” (pg. 29)

So, there are more than a dozen games in development at Wizards and with new IP. That could point to a new setting if it’s D&D based and that could be a very good thing as it seems like we’re constantly circling around the Sword Coast of the Forgotten Realms.

Notes

[1] All statements come from the Edited Transcript from the Hasbro Inc Invester Event 2021 pdf which you can view at the link provided. For important quotes and statements I will include a page number at the end of the statement (for example, pg. X) for quick reference.

[2] pg. 6

[3] D&D 5e launched in the fall of 2014.

Works Cited

Unknown, Hasbro Inc Investor Event 2021. REFINITIV STREETEVENTS. Accessed 3/3/2021. https://hasbro.gcs-web.com/static-files/de97af26-93c3-4bfe-92d6-fbc9e0196fe1

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